ASX energy stocks on watch as Aussie renewables supply ramps up

What could a slowdown in Aussie renewable investment mean for some of the top renewables stocks on the ASX like Mercury NZ Ltd (ASX: MCY)?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's worth watching some of the top ASX renewables stocks this morning after an Australian Financial Review (AFR) article was published this morning, questioning the end of the Aussie renewables boom.

What was in the AFR article this morning?

According to the AFR article, an increase in solar generation capabilities saw renewables account for 30% of Australia's midday power supply for the majority of June.

This, in turn, caused depressed wholesale power prices and increased pressure on coal-fired generators unable to ramp down their operations for logistical reasons.

However, underlying this trend is also the potential that increased generation of energy from renewable sources could mean a scaling back of investment in wind and solar that has been booming in both the public and private sector of late.

According to the AFR, new figures to be released on Wednesday by the Green Energy Markets analytics group will show that total solar power generation doubled in June compared with 2 years prior.

This saw the share of midday energy used climb above 30 percent for 20 out of 30 days in June, which is the first time ever this has occurred in winter.

The AFR article also said that the Clean Energy Finance Corporation (CEFC) will announce $1.5 billion of committed capital to new clean energy investments in the 2019 financial year across 30 transactions worth $6.3 billion.

The article also noted that Federal Energy Minister Angus Taylor has expressed concerns about the sudden influx of renewables projects, particularly given his goal of bringing wholesale power down below $70 per megawatt-hour.

What does this all mean for the ASX renewables stocks?

While many of the ASX energy companies have seen their share prices soar so far this year, the looming threat of oversupply and potential regulatory intervention could see some share price volatility this morning.

The Mercury NZ Ltd (ASX: MCY) share price is up 29% so far this year on strong operational expansion and margin control, while majority investor and fellow renewables group Infratil Ltd (ASX: IFT) has also seen its share price surge 29% higher.

Amongst the broader energy companies, the AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG) share prices are up 3.3% and 24.4% so far this year, respectively.

I'd personally be waiting until after the August reporting season to see what sort of pipeline these companies have planned for FY20 and beyond, while also keeping an eye on average pricing trends within their results releases.

While the renewables investment boom may be slowing, there's still no reason why investing in some of these groups with long-term, strategic portfolio planning around renewables can't be a profitable 'buy-and-hold' investment strategy for growth-seeking Fools.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

two business men sit across from each other at a negotiating table. with a large window in the background.
Mergers & Acquisitions

Deal or no deal? Why the BHP share price is crumbling today

The BHP share price is under pressure following the mining giant's third takeover bid for Anglo American.

Read more »

ASX shares downgrade A young woman with tattoos puts both thumbs down and scrunches her face with the bad news.
Resources Shares

Guess which ASX 200 mining giant could crash 30%

Goldman thinks this miner's shares could be seriously overvalued.

Read more »

Three analysts look at tech options on a wall screen
Resources Shares

Own Fortescue shares? Here's why you now own an ASX tech stock!

The mining giant is now selling software.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Rio Tinto share price sinks amid gas woes

Rio Tinto is struggling to secure the gas it needs to power all of its projects.

Read more »

Miner looking at a tablet.
Resources Shares

ASX 200 mining stocks flying higher on 'most relaxed' Chinese stimulus ever

BHP, Fortescue and Rio Tinto shares could all benefit from China’s new stimulus measures.

Read more »

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Mergers & Acquisitions

BHP shares charging higher as the clock ticks down on the Anglo American takeover

BHP has less than three days before the clock runs down on its $64 billion Anglo American takeover bid.

Read more »

Mining workers in high vis vests and hard hats discuss plans for the mining site they are at as heavy equipment moves earth behind them, representing opportunities among ASX 200 shares as nominated by top broker Macquarie
Resources Shares

2 of the best ASX mining stocks to buy now

Analysts have good things to say about these miners.

Read more »

A woman in hammock with headphones on enjoying life which symbolises passive income.
Dividend Investing

Buy 300 shares in this glorious ASX 200 dividend stock and create almost $2,000 in passive income

Atop the juicy passive income, I like this ASX dividend beauty for its potential share price gains.

Read more »